The Mentality from an MLM

These days, you’re probably not immune to being asked to join or buy from a multi-level-marketing (MLM) business. Also known as network marketing, it a way for companies to sell their product through individuals who market product(s) to their sphere of influence. It gets a bad reputation with “pyramid scheme” and the like, but it’s legitimate and makes sense if you take the time to step back and learn about it instead of repeating the rhetoric you’ve heard from your parents.

Our experience with an MLM led to being open to buying rental properties, which eventually led to me quitting my job and being happy outside of a career. Here’s what I learned by keeping an open mind to an MLM, even though we make $0 from that business today.

This is my experience with our time in an MLM. Mr. ODA would probably have something different to say. 🙂



By now, you may have seen the documentary on LulaRoe. Our experience was with Amway, and it was different from how LulaRoe operates. Now, Amway is the black sheep of the MLM world if you go just based on name. They’re one of the original MLMs. But they sell good products in the health, beauty, and home cleaning genres. As a “consultant,” you’re called an “independent business owner” or IBO. I thought the best part was that there’s no inventory you need to hold. If you want to do “parties,” then you need products on hand. However, it’s much different than how LulaRoe would have hundreds of leggings on hand and makes direct sales out of their on-hand inventory. To earn money, you can recruit more business owners, or you can have customers who just order directly from the Amway website each month. You make money off of what your customers buy, as well as the income that your IBOs below you generate.


There are multiple “teams” associated with Amway. It’s the education arm of the business. Our team met once a week, and you were expected to be there if you really wanted to be in-the-know and considered serious about growing. They helped you structure your business to take advantages of bonuses offered by Amway, and they taught a lot about having the right mentality. Their goal was to foster personal and business growth, provide mentoring and coaching, and provide the tools to grow your business through conferences and seminars.

This is where we got our start. I know it’s hard to believe, but we both were exposed to a lot of growth through this team. The things we learned through the meetings and books we read during these couple of years gave us the courage to make the big decisions we did, getting us to currently having 13 rental properties.


Our introduction to the business was started by being given Rich Dad, Poor Dad by Robert Kiyosaki. The book references an earlier book of his, the Cashflow Quadrant. Each quadrant has its strengths and weaknesses.
– The upper left corner of the quadrant is for those who have Employee mentality. This is someone who is trading time for money. You work an hour and earn $20. If you’re not working, you’re not earning. You’re making money in someone else’s system, and there are people over you who are making more than you (e.g., a supervisor is making more than a secretary).
– The upper right corner is for Business Owners. You own a system that works for you. You have passive income in this quadrant. You may have an employee that is generating income that you earn.
– The lower left corner is for Self-employed people. Here you’re still trading time for money, but you have control over how much you earn based on how much effort and time you put in. This is a risky area because you don’t have security and may not have an established system to rely on and project your income.
– The lower right corner is for Investing. Your money makes money for you. This can also be risky because you’re not guaranteed positive returns on your investments. If you want to make a lot of money, you need to take on more risk.

The point here, according to the team we were on, was that you want to be a business owner. You want to generate passive income so that you’re not trading time for dollars. While someone else is selling to a new customer, you’re earning a percentage of that sale while not doing anything. As you grow your Amway business, you have more and more people generating income through these sales, which you get a percentage of. The kicker is that you need to hit a certain level within your own business before you earn. We set up recurring purchases to use the products we were selling, and had customers set up with recurring orders, so that we could hit that threshold to be eligible for the passive income.


The biggest hurdle to our success was the price of the products. We aren’t someone who values a better quality to be able to justify the higher price. There are people out there that value this, but it’s not our passion. A peanut butter meal bar comes to $3.14 per bar as a customer order (as an IBO, you get the product at cost, which would be $2.82 per bar). The peanut butter granola bars we buy are $0.50 per bar. Clearly, this isn’t a marginal difference in our expenses. The products were good, but not good enough for our finances to take such a hit. I tried to focus on the beauty side of the business and held parties where I recommend products and let women try it. I had passion behind it, but I wasn’t someone who washed my face regularly and put lotion on. I could see the benefits, but I wasn’t practicing what I preached, and I lost my drive.

The next hurdle was location. Our original meeting was with our specific team within the larger team (based on your “pin level,” you had a meeting with the people who were your “downline.”). We moved down to Richmond, and our closest meeting was Fredericksburg. It wasn’t insurmountable, but it was a 40 minute drive there and back once a week. The larger team would all come together in DC every quarter for a conference. We felt like time started moving faster, and we weren’t close enough to make these our friends between conferences, and so we stopped attending the big conferences. Then we stopped attending the weekly meetings. Then we cancelled our team membership. We still maintain our Amway IBO number, since it’s just $62 per year to do that.

The thought process that we learned from their weekly teachings and reading books we probably wouldn’t have read otherwise led to our desire to generate passive income. Mr. ODA had already been interested in the concept, and then when we were talking about venturing down that path with our Realtor selling our Northern Virginia home, he really got the urge to pursue it.

When we sold our Northern Virginia home, we had about $120,000 in our bank account. About $70k of that went to the downpayment and closing costs of our new house. The remaining went to finding a rental property… or two.


Real estate is in the business quadrant, but it’s not completely passive income. Truly, the Amway business wasn’t completely passive because you still needed to have the sales (either through your purchases or customer purchases) to be eligible to earn all the passive income available to you in the business. Most months with real estate, I take the rent money, pay out our mortgages, and that’s it. Sometimes I need to make some phone calls to contractors. However, we have to do very little to maintain our business of investment properties. We can also decide that we don’t want to field the phone calls and hand off the rest our properties to a property manager for 10% of rent. If we don’t have a new property or a property to turn over, then we probably put about 100 hours per year into managing the houses.

We knew we didn’t want to be in the employee mentality for the rest of our lives. Funny, because my goal when I was in college was to work for a “big 4” accounting firm and spend 80s hour per week at work. Then I started working for the government, and my goal was to be CFO in my 30s. Then I got to the headquarters office in my late 20s and hated the environment, so I decided I wanted to be no more than a state office’s financial manager. Then we had kids, and I decided I wanted to be home with them to see all the little moments. Things sure did evolve.

I believe that the time we spent with our Amway team changed my heart. I believe that time was important for me to see a different lifestyle and a different mentality. I don’t know that I would have seen the benefits of pushing ourselves to buy more rental properties had I not seen a lifestyle of entertainment.

I started to realize it would be nice to spend time with my family while the kids were little. Who wants to wait until retirement to spend time at home, when your kids are grown and moved out of your house? Why not spend the quality time in their early years? Let’s travel more and experience more in life. Let’s have more time with the kids than the hellish hours of 5 pm to bed time.

Our cash flow each month is about $7k, just based on the rental properties. That doesn’t include expenses that come up, and every once in a while we get hit with a major system that needs replacement, but most of the charges are a couple of hundred dollars here and there. Some days, I wish I could still do what I loved to do in the transportation world, but I don’t miss the office politics and the moderately strict work schedule.

I’m happy for all the experiences that have led me to this point in life. Perhaps you can read Rich Dad, Poor Dad or Cashflow Quadrant and learn a little bit more about all the options out there. Perhaps you just didn’t know that there are opportunities out there where you’re not trading time for money, or where you’re not cushioning the pockets of an executive while you make a certain salary. Perhaps you just needed your eyes opened to the chance to make your money work for you. Or, perhaps you’ll learn that you like the stability of being an employee, and you don’t want to change. But I urge you to take a look at the options and see what works best for you, now that you’re away that there are options.

Leveraging Money – Mortgage is not an ‘Eight Letter’ Word

Dave Ramsey has convinced (too many) people to pay off their mortgage and be “debt free.” Then you have Robert Kiyosaki telling people not to buy a house because its a liability, but never seems to address that you still have to pay for a roof over your head somehow. We subscribe to a different view – make your money work for you. There are certain types of debt that could truly benefit you, and a mortgage is one of those.

If we worried about paying down our mortgage, we wouldn’t have near the savings and investments we do, and wouldn’t be able to establish enough rental income to replace Mrs. ODA’s income, and being well on our way to replacing Mr. ODA’s. 

We lived below our means, took some loans, and bought a house in one of the more expensive regions of the country – DC suburbs (oh, and while paying for a wedding). We knew we’d have no trouble qualifying for a mortgage and paying the monthly payment, but we didn’t want to pay Private Mortgage Insurance (PMI), which meant coming up with 20% to put down (i.e., about $80,000). In fact, we were pre-qualified for double the purchase price of a house than we were comfortable with because we were more focused on our down payment threshold than what we could support as a monthly payment (which is how a bank will pre-qualify you based on your other monthly debt payments).

Our first, expensive, little house that jumpstarted our investing before we even knew

Our primary goal to enhance our savings in the months leading up to the house purchase was to keep the cost of our daily food intake below $10 between the two of us. We were cautious with how we spent money on groceries, whether we ate out (meaning no buying lunch during the work day), and the types of activities we did. While most of our meals consisted of macaroni and cheese and pb&j, we did ‘splurge’ a little more once in a while (read splurge as meaning “2 for $20” at Applebee’s, not steak dinners). That year of actively watching what we spent paid off in ways we wouldn’t know down the road.

Three and a half years later, we sold our house for a $60,000 profit and purchased a home in the Richmond area for less than what that first house cost us when we bought it. That left a substantial balance in our savings account that needed to get to work. 

We’re not interested in preparing for doomsday. In an emergency, there’s hardly anything that can’t be put on a credit card. If we can’t pay off the credit card, we have money in the stock market that can be liquidated within 24 hours to pay it. This perspective is particularly possible because we live a lifestyle that allows for a high savings rate while Mr. ODA is still W-2 employed, which means we’re even more unlikely to need stock liquidation to cover expenses. We weigh the risk of a possible emergency against not having our money make more money, which gives us the ability to live less conservatively. Since we’re not interested in maintaining 3x our monthly income in a savings account at 0.01% interest rate, the next option to discuss is paying down our primary residence mortgage. 

Our mortgage rate was 2.875%, a very cheap lending rate [this was a 5-year Adjustable Rate Mortgage (ARM), a topic we can discuss in a future post on weighing mortgage options]. The question we had to ask was whether paying down the mortgage at a low interest rate was more beneficial than the income we could bring in with a rental property. If we paid more than 20% for our new primary residence’s down payment, was that going to provide us a greater cash flow to leave our careers before typical retirement age? 

No, it wouldn’t allow us to leave our careers. So, we put the balance of money from the sale of our first home into the stock market and investment properties to make it generate income instead. 

Our first investment property purchase was in February 2016. Since then, we’ve purchased twelve other investment properties, with the most recent two being in September 2019. Mrs. ODA’s income was replaced by our rental property cashflow by the time our son was born in August 2018; that’s within 2.5 years after we purchased our first investment property. 

Of our 12 investment properties, two have mortgages paid off. First, there’s a maximum of 10 mortgages you can have when lending under Fannie Mae. There are ways around this in theory, but that’s another post. One of the mortgages we paid off because it had a balloon payment coming due. Another mortgage was paid off because it had a low balance and was one of the higher interest rates among our properties. Currently, we’re working to pay down two other mortgages due to their relatively high interest rates (5.1% and 4.95%), and each have a balance around $26,000 now. We’re choosing to pay down mortgages in this season instead of purchase new rental properties because we are not finding properties in decent condition that meet the 1% Rule. Plus, not having a mortgage on a property immediately increases your cash flow if you want to live off that monthly income rather than W-2 employment. 

Had we chosen to pay down our primary residence mortgage instead of leverage our funds through mortgages, we’d still have a mortgage payment of over $1,500 per month and no other income strings. Instead, we still have a mortgage payment for our primary home, but we also have the cash flow that replaced Mrs. ODA’s six-figure income.

Choosing Properties

Choosing Properties

Mr. ODA has regular emails come in with new listings in the areas we’re interested in. While some of our houses are 2 bedroom, we find it easier to rent 3 bedroom houses. We also are looking to the possibility of resale, which is better for the 3 and 4 bedroom houses.

First, we look at the condition of the property. We’re interested in properties that can be immediately rented, meaning we’re not looking for remodel projects. Most of our properties purchased required no work to prepare it for a renter, and they are typically recently updated. When I say these houses were recently updated, they weren’t top-of-the-line finishes.  Here’s an example of one we purchase 4 years ago, and the pink knobs are still there!

There are a few properties that took slightly more work. We purchased one property that required a whole-house paint job (including trim work) that took a week doing it myself. We also attempted to rent another property with old carpet on the main floor. The potential renter asked if we’d be willing replace it or refinish the floors; we ended up taking a week to refinish the floors, which has paid off in the long run.

Typically, we’re going to replace appliances, paint, and scrub the place down to prepare it for renting. We’re not looking to overhaul the building or do massive capital improvements for that first renter. However, I’ll note that it doesn’t mean we don’t eventually do that. Just this past year, we had several roof replacements/repairs, plumbing replacements, and HVAC repairs.

We want the house to be in good condition to keep a renter there (we’ve actually had very low turnover), make it easy to re-rent it when there is a vacancy, and to make it attractive for any future sale. We’ve noticed that homes that were typically owned instead of rented are in better condition than if it was managed by a landlord. We seem to struggle wanting to move forward with houses that are currently rented because of all the deferred maintenance.

We have been under contract on multiple houses that we walked away from after the home inspection (e.g., knob-and-tube wiring, vertical clearance requirements on stairs, remnants of a previous fire found, poor patch work). Don’t feel like you’re in too deep if the inspection comes back to show a lot of improvements are necessary. It’s a hard mentality to talk yourself (and your partner) through because you’ve spent time looking at the house, reviewing rental comps, possibly reviewing current lease agreements, and spent the money and time for the home inspection. But keep in mind that it’s not worth purchasing the house and spending more than you’d like to keep the house standing and rentable.

Then, in broad strokes, we’re watching the 1% Rule. This means the monthly rent should be 1% of the purchase price (e.g., a purchase of $100,000 house should yield $1,000 per month in rent). Review current rent prices in the immediate vicinity. We’ve purchased houses in areas that have several rental properties, so it’s been fairly easy to identify a rate based on the number of bedrooms and bathrooms, as well as the amenities we can offer (e.g., appliances, lease term, parking availability). In future posts, I’ll provide the details of each of our purchases.  

Here’s a break-down of our current properties related to the 1% Rule. 

You can see that we didn’t hit the 1% on 5 of them. The first had a tenant when we purchased it 4 years ago; we’ve risen the rent once and plan to raise it to $1200 at the renewal term in July (so raised the rent $50 every two years). The bottom two were in a market that we were unfamiliar with, and even though we thought we would yield $990 easily for rent (yes, is still below 1%), the houses were in excellent condition, so we looked to the future value in the decision making. Unfortunately, we didn’t close on these until September, which is difficult to find renters. We didn’t have many showings at ~$1,000 rent. We ended up lowering the rental price by offering an 18-month lease so that the future rental timeframe was in the spring, and we offered the rest of October as free.

Mr. ODA developed a spreadsheet to calculate all the costs associated with owning the house, which helps determine whether the house fits our portfolio goals, especially if it doesn’t exactly meet the 1% Rule. This spreadsheet makes assumptions for routine maintenance costs, capital improvement costs, vacancy assumptions, insurance, mortgage interest, etc. Calculate the monthly rent less than the monthly cost of each of these assumptions to arrive at the monthly cash flow. Annualize the monthly cash flow, and then divide it by the down payment and closing costs to arrive at a ‘cash-on-cash’ return, which we’re looking to be at least 8-10%.

Next, we examine the neighborhood. We have thresholds for prospective tenants, which typically yields to a middle-of-the-road neighborhood. We’re not looking for a perfect, upscale neighborhood to own a rental because these types of homes rarely meet the 1% Rule. I utilize Trulia to examine the crime rates of the area. We want to offer homes that are in reasonable city locations.

I had fully vetted one house and determined it was worth our purchase. A similar house, with an upgraded kitchen, was for sale a couple of blocks away. I assumed it was the same neighborhood and didn’t do my due diligence. The house showed very well online, and we had several showings from qualified individuals, but then they’d check the house details, only to find out that it was in a high crime zone. We ended up having to lower our credit score threshold to find a renter (compensating with additional security deposit), then had difficulties for over a year collecting her rent, which really should have been expected. We have since sold off that property. 

If all these steps, including the cash-on-cash evaluation, should take about an hour. If we get this far, we go see the house. If the house is in the condition we expect it to be based on the pictures, we make an offer. Our Realtor will write up that offer the same day. Recently, many houses have been in a multiple-offer scenario. This is another trap to not get sucked into. After so much time vetting the house, it’s easy to be attached, especially if you find very favorable data (e.g., you can get rent higher than 1%). It’s not worth owning the house if you have to purchase it at a higher price than you’re comfortable at; it must be a business decision, purely based on the financials.

Keep an eye on listings daily or weekly to keep a pulse on the neighborhoods you’re interested in, evaluate the property condition, consider the 1% Rule and evaluate the detailed financial cash flow, don’t skip the home inspection nor should you ignore the results of it, and keep it a business (not emotional) decision.